Form 10-K - Union Pacific
Form 10-K - Union Pacific
Form 10-K - Union Pacific
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Receivables Securitization Facility – On January 1, 20<strong>10</strong>, we adopted Accounting Standards Update<br />
No. 2009-16, Accounting for Transfers of Financial Assets (ASU 2009-16). ASU 2009-16 limits the<br />
circumstances in which transferred financial assets can be derecognized and requires enhanced<br />
disclosures regarding transfers of financial assets and a transferor’s continuing involvement with<br />
transferred financial assets. As a result, we no longer account for the value of the outstanding undivided<br />
interest held by investors under our receivables securitization facility as a sale. In addition, transfers of<br />
receivables occurring on or after January 1, 20<strong>10</strong>, are reflected as debt issued in our Consolidated<br />
Statements of Cash Flows and recognized as debt due after one year in our Consolidated Statements of<br />
Financial Position.<br />
Under the receivables securitization facility, the Railroad sells most of its accounts receivable to <strong>Union</strong><br />
<strong>Pacific</strong> Receivables, Inc. (UPRI), a bankruptcy-remote subsidiary. UPRI may subsequently transfer,<br />
without recourse on a 364-day revolving basis, an undivided interest in eligible accounts receivable to<br />
investors. The total capacity to transfer undivided interests to investors under the facility was $600 million<br />
at December 31, 2011 and 20<strong>10</strong>, respectively. The value of the outstanding undivided interest held by<br />
investors under the facility was $<strong>10</strong>0 million at both December 31, 2011 and 20<strong>10</strong>. The value of the<br />
undivided interest held by investors was supported by $1.1 billion and $960 million of accounts receivable<br />
at December 31, 2011 and 20<strong>10</strong>, respectively. At December 31, 2011 and 20<strong>10</strong>, the value of the interest<br />
retained by UPRI was $1.1 billion and $960 million, respectively. This retained interest is included in<br />
accounts receivable, net in our Consolidated Statements of Financial Position.<br />
The value of the outstanding undivided interest held by investors could fluctuate based upon the<br />
availability of eligible receivables and is directly affected by changing business volumes and credit risks,<br />
including default and dilution. If default or dilution ratios increase one percent, the value of the<br />
outstanding undivided interest held by investors would not change as of December 31, 2011. Should our<br />
credit rating fall below investment grade, the value of the outstanding undivided interest held by investors<br />
would be reduced, and, in certain cases, the investors would have the right to discontinue the facility.<br />
The Railroad collected approximately $18.8 billion and $16.3 billion of receivables during the years ended<br />
December 31, 2011 and 20<strong>10</strong>, respectively. UPRI used certain of these proceeds to purchase new<br />
receivables under the facility.<br />
The costs of the receivables securitization facility include interest, which will vary based on prevailing<br />
commercial paper rates, program fees paid to banks, commercial paper issuing costs, and fees for<br />
unused commitment availability. The costs of the receivables securitization facility are included in interest<br />
expense and were $4 million and $6 million for 2011 and 20<strong>10</strong>, respectively. Prior to adoption of the new<br />
accounting standard, the costs of the receivables securitization facility were included in other income and<br />
were $9 million for 2009.<br />
The investors have no recourse to the Railroad’s other assets, except for customary warranty and<br />
indemnity claims. Creditors of the Railroad do not have recourse to the assets of UPRI.<br />
In August 2011, the receivables securitization facility was renewed for an additional 364-day period at<br />
comparable terms and conditions.<br />
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